I Do Not Understand Why This Is Not Tax Fraud...

Jesse Drucker on Mitt Romney:

Mitt Romney ‘I Dig It’ Trust Gives Heirs Triple Benefit: In January 1999, a trust set up by Mitt Romney for his children and grandchildren reaped a 1,000 percent return on the sale of shares in Internet advertising firm DoubleClick Inc. If Romney had given the cash directly, he could have owed a gift tax at a rate as high as 55 percent. He avoided gift and estate taxes by using a type of generation-skipping trust known to tax planners by the nickname: “I Dig It.”…

The Obama administration proposed cracking down on the tax benefits in February…. Romney or his trust received shares in DoubleClick eight months before the company went public in 1998. The trust sold them less than a year after the IPO…. Multimillionaires use such trusts to avoid… taxes… [by] assign[ing] a low value to assets they donate to the trust….

The formal name for Romney’s shelter is the Ann and Mitt Romney 1995 Family Trust. Capital gains, interest and dividends from its holdings accounted for about a quarter of Romney’s 2011 income of $13.7 million.
Romney set up his trust in 1995…. Here’s how they work: the person setting up the trust, like Romney, contributes assets such as an interest in a fund or shares in a company. If he makes that contribution before those assets appreciate -- particularly when they are privately held and difficult to value -- he can claim the gift tax obligation is low or non-existent since the declared value is low or zero.

If the trust generates any income -- such as by selling stock -- the eventual tax bill is the responsibility of Romney, not the trust. By paying the capital gains tax, which was 20 percent in the late 1990s and is now 15 percent, he can avoid depleting the funds in the trust -- in essence making an additional donation that’s free of gift taxes. That benefit in particular makes this type of trust “a more powerful driver of wealth transfer in estate planning than almost anything else,” said Breitstone, the wealth preservation attorney….

Bloostein, who didn’t respond to a request for comment, said it was common during the 1990s for lawyers to advise clients to value their stake in a fund’s future profits -- called carried interest in the private equity world -- at zero for gift tax purposes, according to his presentation reviewed by Bloomberg News…

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I Do Not Understand Why This Is Not Tax Fraud...

Jesse Drucker on Mitt Romney:

Mitt Romney ‘I Dig It’ Trust Gives Heirs Triple Benefit: In January 1999, a trust set up by Mitt Romney for his children and grandchildren reaped a 1,000 percent return on the sale of shares in Internet advertising firm DoubleClick Inc. If Romney had given the cash directly, he could have owed a gift tax at a rate as high as 55 percent. He avoided gift and estate taxes by using a type of generation-skipping trust known to tax planners by the nickname: “I Dig It.”…

The Obama administration proposed cracking down on the tax benefits in February…. Romney or his trust received shares in DoubleClick eight months before the company went public in 1998. The trust sold them less than a year after the IPO…. Multimillionaires use such trusts to avoid… taxes… [by] assign[ing] a low value to assets they donate to the trust….

The formal name for Romney’s shelter is the Ann and Mitt Romney 1995 Family Trust. Capital gains, interest and dividends from its holdings accounted for about a quarter of Romney’s 2011 income of $13.7 million.
Romney set up his trust in 1995…. Here’s how they work: the person setting up the trust, like Romney, contributes assets such as an interest in a fund or shares in a company. If he makes that contribution before those assets appreciate -- particularly when they are privately held and difficult to value -- he can claim the gift tax obligation is low or non-existent since the declared value is low or zero.

If the trust generates any income -- such as by selling stock -- the eventual tax bill is the responsibility of Romney, not the trust. By paying the capital gains tax, which was 20 percent in the late 1990s and is now 15 percent, he can avoid depleting the funds in the trust -- in essence making an additional donation that’s free of gift taxes. That benefit in particular makes this type of trust “a more powerful driver of wealth transfer in estate planning than almost anything else,” said Breitstone, the wealth preservation attorney….

Bloostein, who didn’t respond to a request for comment, said it was common during the 1990s for lawyers to advise clients to value their stake in a fund’s future profits -- called carried interest in the private equity world -- at zero for gift tax purposes, according to his presentation reviewed by Bloomberg News…